Endesa Sa Madrid

Hello, good morning, everybody, and welcome to our full year 2024 results presentation, which will be hosted, as usual, by the CEO, Jose Bogas, and the CFO, Marco Palermo. Following the presentation, we will have the usual Q&A session open to those connected on the call and on the web. Thank you, and now let me hand over to Jose Bogas.

Okay, thank you, Mark, and good morning, everybody. Let's start with the highlight of the period, which was marked by significant achievements and solid business execution. In 2024, we recorded a strong financial performance across all businesses, delivering above the target revised upwards in November 2024. EBITDA grew by 40%, while net income increased by 2.5 times versus last year. Solid cash generation with FFO reaching 3.6 billion euros, showing a healthy FFO to net debt ratio at 38%. And lastly, in light of the strong result achieved, we will propose to the next annual General Assembly meeting a dividend of 1.32 euros per share, implying a dividend yield of around 6%. Slide number four illustrates the year-on-year evolution of market dynamics. In 2024, average price in the Iberian wholesale electricity market was 63 euros per megawatt hour, 28% down year on year, in line with the evolution followed by the gas and CO2. This evolution was marked by a high seasonal and intraday volatility. strongly influenced by the larger share of renewable in the mix that already represents around 56% of the system total output. Solar photovoltaic keeps setting new records in Liberia, reaching 44 terawatt hour, while hydro production was 36% higher, and reservoirs are at 56% of full capacity. Mainland electricity demand has shown a steady recovery, leading to a 1.5% growth after adjusting for weather and calendar effects, while Endesa's figure remained flat. In the next slide, we show some of the key regulatory development in 2024, where clearly we saw improvement in a number of sector claims, such as the implementation of the capacity market, the non-mainland generation tender, or the rejection of the 1.2% levy. But I would like to elaborate on some key topics requiring further development. Many countries in Europe have decided to reverse the decommissioning plans, such as Belgium, or even propose new development programs like Italy. In our country, there have been calls from different sectors to rethink the closure of nuclear fleet. We believe that now is the right time to analyze the nuclear protocol. The primary consideration has to be what is best for the system and the economy in general, ensuring security of supply and helping to meet emission reduction target, whilst offering competitive prices and strengthening our independence from volatile commodity market. Any discussion on the future of nuclear energy should be in line with government's energy policy and consider the financial sustainability of the plans by reviewing the current taxation of this technology, which is heavily penalized compared to others. In relation to the distribution remuneration update, we are still awaiting the initial proposal from the regulator, and we are confident on supportive outcome aligned with both energy policy target and the remuneration schemes of our neighboring peers. Modernizing and expanding the grid is essential for a sustainable and secure energy future. This involves integrating renewable energy, enhancing grid resilience and market security, and increasing capacity to meet growing demand from the electrification of key sector. Given the high number of access requests, mainly from the industrial sector, it is crucial to develop a regulatory framework to expedite Procedure given priority to the most feasible project. Moving to the operational parameters of networks, and I am now on slide number six, investment in network is slightly increased by 2%, allowing us to ensure good quality indicators while keeping our regulated asset base stable. Grid are the cornerstone of the energy transition, and we need to accelerate the investment path to meet the very ambitious target set out in the National Energy and Climate Plan. to increase grid resilience and security of supply, and to enable the integration of the growing number of new connections requested. None of this would be possible without an adequate improvement in the remuneration scheme. On slide number seven, in line with our strategic pillars, investment in wind and solar are slowing down, focusing on the highest value asset. In this end, and liberating on our integrated business strategy, yesterday we closed the deal to purchase 0.6 gigawatt of hydro asset from Acciona. As of 2024 year end, 78% of our mainland capacity and 86% of our production is based on CO2-free sources. It is also important to emphasize the significant role of renewable energy during this period, with a 25% output increase driven by a substantial boost in hydro production, resulting in a 51% year-on-year rise in output. Now, on slide number eight, we detail the main drivers of the liberalized power sales performance. The historically high turn rate at the end of the year reflects a highly competitive environment with a high degree of customer mobility. As advanced in the capital market day, the CMD, Endesa, is successfully managing this scenario by focusing in strategy on retaining and building up the loyalty of high-value customers while attracting new ones through our commercial channels with appealing offers and programs. Following these guidelines, in the last quarter of the year, we even added new customers in the liberalized segment. This commercial strategy has resulted in a decrease of B2B index sales and a relevant increase of high-value fixed-price sales in the period. Deep diving into the performance of our integrated strategy in slide number nine, unitary free power margin reached 55 euros per megawatt hour, much in line with the previous year in absolute terms and with the forecast provided in our CMD. If we take a closer look at the different moving parts, first, some improvement of supply margin in line with expectation, benefiting from cheaper sourcing cost in a scenario of lower prices and high volatility. Second, generation margin decrease due to the expected normalization of thermal and nuclear factor, partially compensated by a better performance of renewables. And finally, positive result in sole position management returning to more moderate levels on lower volumes. Taking a look now on gas business on slide number 10, total gas sales were 8% down, mostly related to lower liberal sales and the progressive normalization of CCGT load factors, partially offset by higher gas portfolio management activity. Some improvement of gas margin. recovering from the last year's extraordinary negative condition, also impacted by the outcome of the Qatar arbitration. And now I will hand over to Marco, who will detail the financial results.

Thank you, Pepe, and good morning, everybody. I would like to start, if I may, by congratulating our CEO on a special day today, his birthday. So to start with the celebrations, the excellent results we present today in terms of both EBITDA and net ordinary income, which are above the targets announced to the market. EBITDA reached €5.3 billion, up 40%, while net ordinary income amounted to €2 billion, more than doubling the results achieved the previous year. The comparison of both periods is greatly impacted by the solid results achieved this year, while 2023, as you may remember, was penalized by regulatory interventions, as well as the extraordinary negative results of the gas business, as mentioned before. Finally, a sound cash generation in the period, which, excluding the aforementioned extraordinary gas arbitration paid in Q1 of 2024, is over €4 billion, which represents a conversion ratio, FFO on ABTDA, of more than 75% for the period. Turning now to the analysis of the key eBTDA drivers, and I'm on slide 13, the strength of our result is reflected in the growth of all business lines. In distribution, 15% eBTDA increase, as we will explain later on. The integrated business of generation and supply increased by 45% on the back of the strong performance in customers, including power and gas, with a growth in eBTDA above 40%. the larger contribution from the renewable business, which increased by 19%, largely due to higher output during the period, and improvement in conventional generation, mainly recovering from the gas arbitration award recorded last year. The structure line in grey colour reflects the 1.2% levy impact in both years, with the final figures of €138 million for 2024 and the social bonus sentence refund booked this year. The impact of the 1.2% levy in 2024 was adjusted following the inspection of the levy, which concluded with the exclusion of several items from the tax base initially considered. Moving into a deeper analysis, we are on slide 14. Greed's EBITDA reached €2 billion, up by 15% versus previous year, driven by a gross margin increase, mainly explained by the positive outcome of the final remuneration for the year 2020 recorded this year, which compares with last year's negative resettlements. And second, the improvement in fixed costs due to the adjustment of the workforce restructuring provision booked in 2023 and the reversal of the provision related to the sale of the optic fiber network. Generation and supply EBTDA includes and we are now on slide 15, increased by a sound 45%, reaching 3.3 billion euro, mainly driven by the gas business recovery from last year's exceptionally negative situation, as already explained, and while the free power and other remained basically almost flat. Finally, stability in fixed costs, thanks to our continued focus on efficiencies. On slide 16 now, our focus on efficiency is progressive in line with our expectations. Total fixed costs were 5% down versus last year, with efficiencies absorbing both inflation and growth. The savings are built over a cost contention plan on the back of a more efficient organization with a reduction of average head counts and operational optimization. Moving now to the analysis below EBTDA, and I'm on slide 17, DNA increased versus previous year, driven by higher amortization due to the investment effort. Net financial results improved mostly on the back of lower average gross debt, but in a context of higher interest rates. And finally, tax rate reached 27% affected by the non-deductibility of the 1.2% temporary energy tax. As a consequence of the above, net income is up by a sound 2.5 times, while net ordinary income doubles the amount achieved in the previous year, visibly improving the net ordinary income to EBITDA conversion ratio. Going to the next slide on cash generation, FFO stood at 3.6 billion euro. Focusing on the moving parts, There has been a strong EBITDA growth, as seen before, negative working capital of around €0.4 billion, mostly affected by the payment of the Qatar arbitration in Q1, while the regulatory working capital remains stable. There has been a favorable evolution of cash out for taxes, while financial charges were almost flat compared to last year. Excluding the aforementioned exceptional gas arbitration award, adjusted FFO would reach more than 4 billion euro. That is 1.2 billion euro increase versus previous year, proving the solid cash generation throughout the period. On slide 19 now. Net financial debt landed at €9.3 billion, an improvement of 11% compared to previous year. On top of the strong cash flow contribution, we cashed in around €800 million from the partnership with Masdar, totaling €4.4 billion funds that more than covered dividend payments and CapEx needs. Finally, our strong commitment to a strict financial discipline has resulted in healthy credit metrics. The FFO to net debt ratio closed at 38%, higher than expected in the capital market day, and even above the target for 2027, which was 37% for that year. Regarding the debt maturities, I'm now on slide 20, the financial position remains at solid level with an average life of debt of around four years, ensuring adequate support for the company's business plan in a challenging environment. Available liquidity amounts to 6.5 billion euro, providing ample coverage for debt maturities of up to 35 months. All the above is reflected in the recognition by the rating agency in comfortable credit metrics, paving the way to face the challenges that lie ahead in the coming years. Let me now hand over to Pepe for the final conclusions.